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Czech Republic, lenders sign memorandum on fund financed from bank contributions

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Czech Republic, lenders sign memorandum on fund financed from bank contributions

The Czech government has signed a cooperation memorandum with the country's four largest banks to set up a national development fund, which will finance investment projects supporting the Czech Republic's social and economic development.

The lenders that signed the memorandum include KBC Group NV unit Československá obchodní banka a.s., Erste Group Bank AG unit Česká spořitelna a.s., Société Générale SA unit Komerční banka a. s. and UniCredit SpA unit UniCredit Bank Czech Republic and Slovakia a.s. State-owned Českomoravská záruční a rozvojová banka a.s. will be the founder and sole shareholder of the fund.

An application to issue an operating license for the fund will be filed with the Czech central bank by the end of 2019. The fund will provide a range of debt and guarantee products for project financing that will not compete with products offered by commercial banks operating in the country, the Czech government's press office said Sept. 19.

The total initial funding provided by the participating banks will amount to 7 billion Czech koruny, Reuters reported the same day, citing Czech Industry Minister Karel Havlíček. Further contributions to the fund will be voluntary, as was was the initial funding.

The fund, which was proposed by Prime Minister Andrej Babiš in May, is being launched instead of a sector bank tax the introduction of which was advocated by the government junior coalition party ČSSD.

The fund will invest in infrastructure, education, healthcare and other projects, using leverage to multiply the initial 7 billion koruny financing by a factor of five. The prime minister expects that other companies, in addition to banks, will also contribute to the fund in the future, Reuters noted.

As of Sept. 24, US$1 was equivalent to 23.51 Czech koruny.